1960 (9) TMI 114 - HC - Income Tax

Court allows full depreciation for motor-car used for business and personal purposes under section 10(2)(vii)

Vankadam Lakshminarayana Versus Commissioner of Income-tax

The High Court ruled in favor of the assessee family in a tax case involving the sale of a motor-car for business and personal use. The court held that ... - Issues:1. Whether the sale of a motor-car for a certain amount resulted in a loss for the assessee under section 10(2)(vii)Rs.2. If a loss was sustained, what is the correct amount of the loss - whether it is a specific sum or another amountRs.Detailed Analysis:The case involved an assessee family engaged in the tobacco business who purchased a Vauxhall motor-car for a specific amount, partially for business and personal use. The Income-tax Officer allowed depreciation for certain assessment years, and when the car was sold, a loss was computed under section 10(2)(vii) at a particular sum. The assessee contended that the actual loss was higher than the computed amount and appealed the decision. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld the initial assessment, leading to the matter being referred to the High Court.The primary issue revolved around the calculation of the written down value of the vehicle for determining the loss under section 10(2)(vii). The Tribunal believed that the depreciation allowance under clauses (vi) and (vi-a) should be considered in computing the written down value, contrary to the department's method. However, the Tribunal could not enhance the assessment due to no appeal from the department. The court was tasked with interpreting the relevant statutory provisions to resolve the discrepancy.The court analyzed sections 10(2), 10(3), and 10(5)(a) and (b) to determine the written down value of the vehicle. It emphasized the importance of the term 'depreciation actually allowed' in section 10(5)(b) and concluded that only the depreciation actually granted to the assessee should be considered, not the notional allowance. The court rejected the theory that assets used partly for business and non-business purposes should be divided for cost calculation, asserting that only the depreciation allowance should be apportioned based on usage.Ultimately, the court found in favor of the assessee, stating that the Income-tax Officer should have considered the entire depreciation allowance permissible under clauses (vi) and (vi-a) in determining the loss. Had this method been applied, the assessed loss would have been higher than initially calculated. Therefore, the court answered the questions in favor of the assessee, highlighting the importance of interpreting statutory provisions accurately for fair assessment.